On January 30, 2015, the National Bank of Ukraine adopted a decision to revoke a banking license and wind up the following three insolvent banks: JSB PORTO-FRANKO PJSC, CB AXIOM PJSC and Bank Demark PJSC.
The rationale for this decision is based on the proposal of the Deposit Guarantee Fund prompted by the lack of other ways to withdraw these banks from the market.
The Deposit Guarantee Fund is to pay out the guaranteed compensation to depositors within the shortest possible time frame.
As is known, the National Bank of Ukraine has earlier declared these banking institutions insolvent as all of them were involved in risky activities, which posed serious threats to the fulfillment of their obligations to depositors and other creditors.
In addition, JSB PORTO-FRANKO PJSC and CB AXIOM PJSC appeared to be in breach of the requirements of the law on Prevention and Counteraction to Legalization (Laundering) of the Proceeds from Crime or Terrorist Financing.
Thus, JSB PORTO-FRANKO PJSC encountered serious liquidity problems in spring 2014, which resulted from the imprudent policy of attracting funds, and the bank's heavy dependence on "expensive resources", in particular, term deposits of individuals and foreign exchange funds.
However, the bank's shareholders and management failed to take the required contingency measures.
In addition, the inspection conducted at JSB PORTO-FRANKO PJSC in February 2014 revealed that the bank had violated the requirements of the law on Prevention and Counteraction to Legalization (Laundering) of the Proceeds from Crime or Terrorist Financing.
In view of the further deterioration of the financial standing of JSB PORTO-FRANKO PJSC, in early August 2014, the National Bank of Ukraine placed the bank under special supervision to control its activities by appointing an overseer. In late August 2014, JSB PORTO-FRANKO PJSC was declared a problem bank.
The resolution plans, which JSB PORTO-FRANKO PJSC had submitted to the National Bank of Ukraine three times, did not contain sufficient and timely measures to improve the bank's financial health. The scheduled injection of funds to increase the regulatory capital fell short of enabling the bank to fully meet its obligations to depositors and other creditors.
In violation of the requirements of Article 58 of the Law of Ukraine On Banks and Banking, the owner of qualifying holding in a bank failed to take timely measures to prevent JSB PORTO-FRANKO PJSC from going insolvent.
Given the lack of prospects for a bank recovery and the need to protect the interests of depositors and other creditors of JSB PORTO-FRANKO PJSC, in September 2014, the National Bank of Ukraine Board adopted a decision to declare JSB PORTO-FRANKO PJSC insolvent.
In October 2014, the National Bank of Ukraine Board took a decision to declare CB AXIOM PJSC insolvent in view of the repeated violation of the requirements of the law on Prevention and Counteraction to Legalization (Laundering) of the Proceeds from Crime or Terrorist Financing and the execution of large-scale cash transactions in national currency by this bank, which pointed to its involvement in risky activities, thus exposing depositors to heightened risk.
A considerable deterioration of liquidity ratios at Bank Demark PJSC, growing risks faced by creditors and depositors prompted the NBU's decision to appoint an NBU overseer to this bank in August 2014.
Based on the results of the unscheduled inspection carried out by the regulator in August 2014, it was established that the bank infringed the NBU regulations and was unable to fully meet its obligations. In view of the above, Bank Demark PJSC was declared a problem bank.
The measures aimed at improving the financial standing of the bank and restoring its solvency developed by the bank in compliance with applicable laws did not envisage the participation of the bank owners in increasing the bank's regulatory capital and did not mention the funding sources, in particular, the funds which could be raised from potential investors to enable the bank to meet its obligations to clients.
In view of the above, in compliance with the requirements of the law, in September 2014, the National Bank of Ukraine Board took a decision to declare Bank Demark PJSC insolvent.